Contours FranchiseContours franchise, Curves franchise 2 of the fastest growing fitness franchises in the world. This was the claim and at one point was probably true, but what about now. The facts are this was very short lived. Where does a contours franchise rank today? Note: Contours is still known as Contours Express in the USA. Over 80 ex Contours franchisee's are taking legal action -------------------------------------------------------------- BEFORE WE START HERE IS AN EXCERPT FROM AN EMAIL SENT BY DAVE HUNDT CEO OF CONTOURS TO ALL EXISTING FRANCHISEE's dated March 16 2008. QUOTE.......... "Each franchisee is running their own small business. The unfortunate reality is that 9 out of 10 small businesses will fail in the first year. Of those that survive the first year 9 out of 10 will fail in the following 5 years. Franchising dramatically mitigates these risks." So what Dave is telling us is that 90% of HIS Contours franchise sales will FAIL. Does he and his corporate office share this information to a potential franchisee. This is a very important point. So why are they even selling franchises if they know that 90% will not even succeed? Answer, because they - the franchisor make money out of you whether you succeed or fail. I know he is trying to say that these figures are if you go into business alone, and if you go with a franchise you risk less, but that is a lie, the research shows the opposite, go here for details. I would welcome Contours to do the same and show me qualified independant research that validates his claim. So if he is referring to your own business failure rates are 9/10. And I have just proven with independant research, that failure rates of franchises are even higher, that leaves Contours with a less than 1 in 10 success rate. You could do better than invest in a contours franchise. In a trade magazine called "Fitness Business Pro" Volume 24; Number 3; 1 March 2008 Page 17, Pamela Kufahl reports the following Contours Express, a women-only franchise company based in Nicholasville, KY, ranked No. 329 this year,(2008) making it the fitness franchise with the biggest drop in ranking. It ranked No. 141 (2007) last year. Here are some unproven claims by the CEO of Contours Australia, these claims are to push the sales of further contours franchise, not to ensure the success of the exisintg ones. My responses are in bold. As it is illegal to make projected earnings or profit claims in the franchise agreements, franchisors use the media heavily to make over inflated earnings claims as can be seen by the following 1. The simplicity of the model makes it affordable for people looking to become franchisees. It costs less than $100,000 to start up and Mr Hundt said it took about three months for franchisees to break even.(BUSINESS Shape of things to come Joanna Tovia 479 words 12 April 2007 Herald-Sun) This is a blatant lie, the average cost in getting a studio up and running, not including an initial marketing drive was $118,000 in 2006. You would be looking at upwards of $130,000. Break even in 3 months? Yeah! and I parted the Red Sea 2. Unlike most franchisors that take a percentage of the revenue franchisees make, Contours charges a flat fee and that stays the same regardless of how much money a franchisee makes. (BUSINESS Shape of things to come Joanna Tovia 479 words 12 April 2007 Herald-Sun) This sounds good at first, what is better than having a flat fee! Problem is this is a fee you pay after the first six months regardless of your earnings or profit. This just tells us that Contours is not confident that the majority of their studios can get enought members to pay them sufficient royalties. If they charged 10% of revenue from profit instead, like any good franchise, then when the studios hit the 300 member mark, (a claim they make is easy within 12 months) they would make closer to $1,700 in royalties rather than the $1,000 flat fee. As it is most of their studios earn much less, if they used the 10% of franchisee profits model for their royalties, they would make very little. So if a franchisee is not making a profit, they still have to pay $1,000 royalties out of any GROSS earnings,(not net profit) even if they are running at a loss. That is the rich robbing the poor my friend. You will be paying them for a long time before you pay yourself a single cent. Imagine paying royalties and tax with money you don't have. i.e. with negative profits. If that is your idea of financial freedom, then a Contours franchise is for you. 3. With an initial investment of below $100,000, Contours says their franchisees can break even in the first few weeks of operation with known monthly revenues for the year ahead. (Finance In great shape for success - FRANCHISING: A SPECIAL ADVERTISING REPORT MATP 477 words 1 February 2007 The Australian) Break even withing a few weeks? Didn't you say in the Herald-Sun it was 3 months. What world does this guy live in. No business franchise or otherwise breaks even in the first few weeks. The operating costs of running a Contours franchise average around at least $6,000 per month, NOT including staff wages.Wages for staff, superannuation and GST averages another $5,000-$10,000. For a total of $10,000-$15,000 per month at best, many will be over the $15,000 mark. You would need well over 250 members in the first few weeks. Even the very small percentage of successful studios could not even achieve this. Sounds like a sales pitch. 4. "We've put a lot of time and effort in making sure that each individual business is successful," Hundt says. "When most people do their due diligence, they contact a couple of studios to see how they're going and 95 per cent of them have reached profitability in about six months. So, the attraction from a business point of view is very high, which is why the franchise has grown so quickly." (Supplement Gym franchises are fighting fit Pam Kershaw 808 words 17 October 2007 The Sydney Morning Herald) This one is another joke for 2 reasons. Firstly they do not put any time and effort to make sure studios succeed, When some studios were in difficulty and asked head office for help and advice they were asked to come in and "discuss options". No options were discussed, they were simply told how to close down. Close downs are enouraged because of a money maker called "churning". As for due diligence and contacting studios, did they tell you that the studios they recommend you contact are owned by relatives of the corporate office staff? 5. Hundt says most franchisees become profitable after signing up about 200 members, which generally takes six months. A studio reaches maximum capacity at about 700 members. (Supplement Gym franchises are fighting fit Pam Kershaw 808 words 17 October 2007 The Sydney Morning Herald) Does this guy know what "profit means" Profit means all the bills and wages, and operating costs are paid. 200 members? Didn't you state earlier it only takes a few weeks? And in another article 3 months? Now it is 6 months, make up your mind Dave. Pulling figures out of your arse is not an acurate way to project earnings. Most do NOT become profitable after 6 months, I would go as far as to say none. And if they do, please provide the financials. They never do. My advice is contact all studios, pick a huge range and ignore the ones they tell you to contact as they as shrills (selected by head office to tell you what they want you to hear). Ask to see their annual tax returns- this is one place people don't lie about their earnings, then you will see how much of it is true. Unfortunately a Contours franchise or any other franchise is not required by law to give you projected earnings. In fact you will have to sign the franchise agreement, stating that they never made you any indication of possible earnings. Instead they will make commnents in the media regarding earnings (see above), this is a sales tactic to sell more franchises. They will also make statements when talking to you such as all of our studios are right on target with their membership. We were told at training that all studios were averaging 70 new members per month. Of course it is not in writing, but this is how they create a buzz to make you think you can earn alot of money with their system. The only ones earning are them, each time they make a sale of a contours franchise, as Contours coprorate stated themselves in a meeting with a franchisee "We are not in the business of keeping franchisees open, we are in the business of selling franchises. Contours franchise? I think NOT! CONTOURS STUDIOS THAT HAVE CLOSED DOWN SO FAR CONTOURS STUDIOS ABOUT TO BE CHURNED Return Home from Contours Franchise |